Friday, February 08, 2008

Gift cards for groceries... the recession is here

The LA Times is reporting Wal-Mart shoppers are buying more milk and bread with gift cards received at Christmas than they are using them on splurge purchases like iPods.

This is a bellweather for our economy... the canary in the mine if you will. Americans are smart and when grandma and your cousins are using their gift cards to buy groceries the message is clear: The recession is here.

For several years I gave my own grandmas Wal-Mart gift cards and encouraged them to do just that - use them to pay for their medications and groceries. Neither of them would do it and the cards got saved for splurge purchases on clothing and kitchen electrics.

I've seen this change with my own eyes however. Grandmas are using gift cards to buy everyday essentials like milk, bread and eggs. Many of them are the same people who lived through the depression. They're not stupid. It means their personal finances are constrained enough that they have entered a resource saving mode. The same instinct kept their families feed during the depression.

Personally I don't think we'll hit a depression again this time... not unless the drought devastates crops. We are heading into a substantial recession. Younger generations would do well to connect with those in the 80+ club and start learning how to stretch a dollar now. Otherwise those younger folks are going to find themselves going to dinner a lot at grandma's because she's the only one with food left after everyone else blew through their paycheck.